China blows by U.S. as world's largest car market

China has overtaken the U.S. as the world's largest car market. The Associated Pressreports that research firm JP Power expects China's light vehicle sales will be 12.7 million in 2009, up 44% from the previous year. U.S. car and light truck sales will be only 10.3 million. Four years ago, American vehicles sales topped 16 million.

Monthly car sales in China have been running ahead of the U.S. for several months, so the news is not altogether unexpected -- and it is not necessarily bad news for American car companies. GM sold 177,000 cars in China in November, about 20,000 more than it did in the U.S. GM and German car company VW are the leaders in the car market on the Chinese mainland.

With the U.S. now in second place among global car markets, can the world's largest multinational vehicle manufacturers hold their own in the regions that have generated the majority of sales for decades -- the E.U. nations, Japan and the U.S.? Market-share shifts in most of these nations, particularly the U.S., have been in favor of the Japanese for many years. But Japanese growth in the sector has begun to moderate as American car makers produce better and more competitive vehicles.

The focus on sales increases for the multinational auto firms now shifts to China. Ford's (F) sales in China are rising rapidly, but it sells fewer than 30,000 cars there in most months. Toyota (TM) is also well behind GM, selling about 70,000 vehicles on the mainland in an average month.

While GM has lost sales in most developed markets around the world, its lead in China means that the top spot is its to lose. Continued success in China may be more important to the turnaround of the company, which is primarily owned by U.S. taxpayers, than improvement in its fortunes in the home market.

GM has two main advantages in China. One is its joint venture with Chinese car giant Shanghai Automotive, which gives GM local manufacturing leverage and a distribution network. The other is that its brands, particularly Buick, have strong appeal among Chinese consumers.

While U.S. car sales may not do much to help American taxpayers recoup their investment in GM, China's flourishing car market could.

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